TOKYO, Jan 20 (Reuters) - Japan's finance ministry is set to estimate new bond issuance at some 32 trillion yen ($248.10 billion) for fiscal 2026/27, lower than its planned issuance for the next fiscal year beginning April 1, a draft reviewed by Reuters showed on Friday.
A boost to defence spending would push up overall budget expenditures to a record amount of 115.6 trillion yen in fiscal 2026/27, assuming nominal growth of 3%, the draft showed, versus 114.4 trillion yen planned for the next fiscal year.
New borrowing would be some 32 trillion yen in 2026/27, lower than 35.7 trillion yen for the next fiscal year despite a record budget, as the estimates count on a rosy scenario of higher economic growth and greater tax revenue.
That would be the lowest level in 10 years.
Estimates for the government general account budget for the coming few years will be compiled for submission to parliament, which will be convened next week for the debate on the fiscal 2023 budget and other issues.
However, there are risks such as weakening of the government's ability to finance key policy areas of defence and education, failure to maintain recovery in corporate profits and a spike in bond yields on expectations for monetary policy normalisation.
The estimates showed that a 1% cut in economic growth rates would curb tax revenue by 2.4 trillion yen and a 1% rise in interest rates would increase debt servicing costs by 3.6 trillion yen.
($1 = 128.9800 yen) (Writing by Tetsushi Kajimoto; Editing by Christopher Cushing and Jacqueline Wong)
